USDA GAIN: Livestock and Products

USDA GAIN: Ukraine Livestock & Products Semi-Annual Report

Production of beef will continue its 20 year stagnation trend, while production of pork is expected
to rebound after a slight drop in 2011, boosted by internal demand and cheap feeds

Executive Summary

Despite a decrease in pork production in 2011, production in 2012 is expected to grow. The industry will be building stocks in response to cheap feeds and attractive pork prices. In early 2012, pork price levels exceeded those in 2010 and 2011. Significant money was put into pork production by both domestic and foreign strategic investors. This sets a foundation for long-term production growth. Increased imports of high-quality animals from Germany indirectly confirm this trend. The industry faces unsatisfied domestic demand, but export markets are limited to neighboring Russia.

Production of beef will continue to show no signs of recovery. The number of dairy animals, which constitute the vast majority of beef production is decreasing and will remain on a downward trend in 2012. The number can decrease even more in response to a partial cheese export ban introduced by the Russian authorities in early February 2012. The ban led to a milk price drop, and a corresponding animal number decrease is expected in central and eastern Ukraine. Increased animal slaughter may lead to a short term beef production spike.

Investments for industrial milk production made in 2011 will not lead to a significant animal number increase. It likely to be offset by the corresponding drop in the household sector. Beef exports will remain limited mostly to neighboring Russia, where Ukraine has some trade regime advantages.

Most of the factors outlined in the Livestock and Product Annual GAIN Report will continue to affect production and trade. In the production section below some new external factors impacting production and trade are analyzed.

Production

Publication of official production data for 2011 by the State Statistics Service of Ukraine allowed for a PSD table numbers review. The 2010 numbers were already in compliance, so none of them were changed. Livestock and swine production indicators for 2011 remained almost unchanged. Trade in live pigs happened to be higher than expected. This trade growth (mostly import of high-quality pigs from Germany) indirectly supports a suggested trend for increased pig production in 2012 despite some decline in 2011.

African Swine Fever (ASF) cases registered in Eastern Europe this far had no impact on Ukrainian pork production. Ukraine introduced an import ban on Russian (in 2011) and Belorussian (in March 2012) pork and live pigs. Imports of these products were insignificant and had little impact on trade. So far Ukraine claims no officially confirmed AFS cases on its territory, although there were cases registered in close proximity to the border on Russian Federation side. Any possible AFS introduction could stop foreign trade in pork and have a negative production impact in affected areas. Being a net pork importer, Ukraine will not suffer very significant losses from trade stoppage. The production impact may wary widely depending on outbreak size.

Another new factor impacting livestock number and beef production forecasts is the introduction of cheese import restrictions by Russian Federation in February of 2012. During February, Russia’s Rosselkhoznadzor announced two separate bans (the first for three companies, and a subsequent action against four suppliers) that impacted major Ukrainian cheese production facilities. Justification for the first ban was use of palm oil in Ukrainian cheese. This argument was publicly opposed by the Ukrainian government and producers. Justification for the second ban was the inability of Ukrainians producers to match the provisions listed in the Russia’s technical regulations. According to industry sources, the import ban impacted well over 50 percent of Ukrainian cheese exports and covered the biggest and most technologically advanced facilities in central and eastern Ukraine.

Russia’s partial import ban led to a significant milk price decrease in impacted regions, although there have been reports about milk price decreases in other regions as well. Inefficient milk producers (mostly small industrial farms and households) are likely to respond by increased slaughter. In this way, the cattle number in 2012 is expected to further decrease despite some stabilization observed in late 2011.

Trade

On February 8, 2012 the Minister of Agricultural Policy of Ukraine Mr. Mykola Prysiazhnyuk met with Deputy Head of Rosselkhoznadzor Dr. Nepoklonov in an attempt to open the Russian market for Ukrainians meat products. The Ukrainian mass media reported that an agreement was reached.

Despite the formal agreement, Ukrainian exports to the Custom Union Countries will remain to be highly vulnerable, as has happened recently to Ukrainian dairy exports to Russia. Ukrainian mass media carefully monitored the situation, saying that the restriction was political in nature. [For Section II Statistical Tables, please download the document]